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THE CONTRIBUTION OF THE PARTNERSHIP IN 2014

OTHER CONTRIBUTIONS

THE CONTRIBUTION OF DE BEERS GLOBAL SIGHTHOLDER SALES

In late 2013, DBGSS relocated from London to Gaborone and the aggregation of diamonds began to take place in Botswana for the first time. As a result, diamond imports from De Beers operations in Canada, South Africa and Namibia accounted for the largest portion of the Partnership’s revenue in 2014, 34 per cent (approximately US$2.3 billion). These were aggregated and sold by DBGSS in Botswana. This means that there were more diamonds coming into Botswana to be aggregated and sold, which in turn resulted in more jobs and revenue.

In 2014, DBGSS completed its first full year of operation in Botswana and directly contributed US$380 million (nine per cent of the Partnership’s total direct contribution) to GDP. This was more than the whole agriculture sector.37 Spending in the supply chain and by employees of the Partnership and their suppliers meant that the activities of DBGSS contributed another US$30 million to Botswana’s GDP.

In total, DBGSS contributed US$410 million to Botswana’s GDP in 2014 (2.5 per cent of GDP)38 (see Figure 14).

FIGURE 14: OVERALL CONTRIBUTION TO GDP OF DBGSS, 2014

FIGURE 14: OVERALL CONTRIBUTION TO GDP OF DBGSS, 2014

Ten times a year, around 200 of the world’s leading diamantaires from Belgium, Israel, China, the United States, India and elsewhere congregate for up to a week in Gaborone to buy aggregated rough diamonds from DBGSS, where previously they would have attended the Sight in London. This has helped develop ancillary businesses in sectors including hotels, restaurants and chauffeur services.

THE PARTNERSHIP’S CONTRIBUTION TO GOVERNMENT AND SHAREHOLDERS

Anglo American data on the taxes borne (including income taxes and royalties) and collected (such as employement taxes) by De Beers entities in Botswana was used to determine the Partnership’s total tax contribution.39

Of total revenue, over one third (around US$2.2 billion) was distributed by the Partnership to the Government. This amount was made up of taxes and royalties (US$1 billion) and dividends paid to the Government by virtue of its 50 per cent shareholding in Debswana and DTCB (US$1.2 billion).40

Combining taxes, royalties and dividends, the Partnership’s total distribution to the Government was around 39 per cent of the total revenue it raised in 2014. This is more than the entire healthcare budget and all social welfare programmes combined in 2014.

In comparison (as shown in Figure 8), of the total revenue generated (nearly US$7 billion), about 10 per cent (US$0.7 billion) was distributed to De Beers Société Anonyme and was available to be distributed to its shareholders as a dividend in 2014.

INVESTING IN PEOPLE

The Partnership has had a long and continuing commitment not only to creating employment for local communities, but also to providing training and skills development. Human capital development has been a central pillar of Botswana’s economic development strategy, and this has been strongly supported by the Partnership. Employment and skills development are primary ways to enable people to shape opportunities for themselves and their country.

In 2014, the Partnership spent approximately US$6 million on more than 550,000 hours of training and skills development. The Partnership is also committed to providing bursaries for students to study at the world’s leading universities. Many beneficiaries of the bursary programmes, of which there have been more than 1,000, have become leading figures both within the Partnership and in the wider economy, government and industry (see case study – Balisi Bonyongo).

SUPPORT OF LOCAL SUPPLIERS

As previously mentioned, the Government has long sought to increase the value added locally in Botswana from its diamonds by developing the diamond value chain both downstream, through the beneficiation of rough diamonds, and upstream, through suppliers to the industry. Government has also prioritised the diversification of the economy away from diamonds.

As an important buyer in the economy, the Partnershipstimulates and supports local mining inputs. In 2014, it spent five per cent of its revenue with local suppliers. Local procurement programmes run by the Partnership support the development of a resilient local supply chain and the creation of a viable, self-sufficient economy beyond the life of the mines. For example, Debswana’s local procurement strategy ensured that ‘at least half of the Cut-8 project-related contracts were awarded to citizen-owned or Botswana-based companies’.41

Of the Partnership’s total spending with suppliers (excluding diamond imports) in 2014, 54 per cent was estimated to have been spent with local suppliers and 46 per cent with foreign suppliers. However, accurately defining local supplier spend is difficult to do, as many stakeholders interviewed for this study recognise that the local manufacturing sector in Botswana is underdeveloped, and many locally registered suppliers are probably distribution agents for overseas companies rather than local manufacturers. Therefore, in order to estimate this ratio, a conservative approach was adopted by including all spending on goods and services from companies that were Batswana-owned, and estimating the amount of money that stays in the country when spent with Botswana counterparts that have foreign owners.42

To encourage local enterprise development, the Partnership, along with Anglo American plc, established an enterprise development programme called Tokafala in 2014. The programme aims to promote economic development and stimulate job creation by supporting small, medium and micro enterprises (SMMEs) through mentorship and advisory services, complemented by access to market and financial support (see case study – Gardson Mazonde). In addition, it seeks to improve small companies’ access to and links with business opportunities with Debswana, DBGSS and other partners. Tokafala aims to help up to 250 SMMEs and support over 2,200 jobs in three years from 2014 to 2016. Negotiations are also under way with the Government to expand the programme to 2018 so that it can support a further 650 businesses and 3,000 jobs.

CAPITAL EXPENDITURE

In 2014, the Partnership spent eight per cent (US$0.5 billion) of its revenue on capital expenditure.

Pauline Phologolo is the owner and manager of Group Pee. Her company entrolled in Tokafala since 2014, makes corporate wear, protective clothing and school uniforms.

Pauline Phologolo is the owner and manager of Group Pee. Her company entrolled in Tokafala since 2014, makes corporate wear, protective clothing and school uniforms.

37 World Bank, (2014). World Development Indicators. Actual figures for Botswana’s GDP in 2014 was US$14.98 billion with Agriculture responsible for 2.4 per cent.

38 In 2014, DBGSS’s output was not captured in Botswana’s national accounts. Therefore DBGSS’s direct contribution to GDP has been added to the GDP data provided by the statistics authorities in the modelling of Botswana’s economy.

39 This is consistent with the methodology used in the Anglo American Sustainable Development Report and Tax & Economic Contribution Report and is in line with industry best practice.

40 Note that dividends payable in respect of the Government’s 15 per cent shareholding in the broader De Beers Group are not included in this report, as they are generated outside of Botswana.

41 Debswana Report to Society (2014), available at: http://www.debswana.com/Media/Reports/Debswana%20Report%20to%20Stakeholders%202014.pdf (Accessed 8 October 2015).

42 The figures presented on operational spending with local suppliers and operational spending with international suppliers differ from those recorded in the Debswana Report to Society due to differing definitions, the exclusion of CAPEX and the fact this is referring to the whole group of companies rather than just Debswana.